24 MARCH, 2022

A loan against property is a secured loan that you can avail to arrange funds for your varied needs. To avail a loan against property, you pledge your property with the lender and borrow money against it. There is no specific purpose mandated by the lender to use the money. Therefore, you can utilize the loan amount for any of your needs, be it a wedding, education, house renovation, medical expense, travel, etc. Moreover, the process of applying for the loan is simple and easy, thanks to the online application facility provided by lenders. However, for that, you must fulfill the eligibility criteria. The first thing the lenders review while processing your application is your CIBIL score. If you do not have a good score, you might not get the loan approval.

Read on to know about the CIBIL score and why it is important.


What is the CIBIL score?

CIBIL score or credit score is a three-digit numerical representation of your creditworthiness and credibility. It ranges from 300 to 900, where, the higher your credit score, the better, as lenders prefer borrowers with a high credit score. To avail a loan against property, you must have a credit score of at least 700. A score below 700 is considered as a poor credit score.


Your credit score is based on:


  • Payment history - Your payment behavior is observed to determine the score. If you pay loan EMIs and credit card bills on time, it boosts your score. Similarly, a delay in the payment can reduce your score.


  • Total credit amount - The duration that has passed since you had your first credit account is reviewed to determine the score. Similarly, the total credit amount is a crucial factor. You must not use more than 30% of your credit limit for a high credit score. A low percentage means you are good at handling credit.


Can your credit score affect your loan against property eligibility?

Yes, your credit score can affect your loan against property eligibility. If you have a low score, it can indicate that you have defaulted in the past or are not reliable in handling the credit. Having a poor credit score can make the lenders reject your loan application. Even if they approve the loan, there are high chances that you will get a low loan amount and be charged a high-interest rate.


What should you do to take a loan against property?

Before you apply for a loan against a property, you must check your CIBIL score first. You must apply only when you have a high score to avoid getting rejected. You can enhance your score by paying off your debts, keeping a mix of secured and unsecured credits, paying EMIs timely, and not applying for multiple loans at the same time. Moreover, you must check your credit report periodically to report any mistakes or discrepancies.


Always maintain a high credit score to get lower loan against property interest rates and high loan amounts. Once you fulfill the eligibility, you can apply for the loan online with a few steps.  

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.